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THEN, NOW AND TOMORROW
By Stephen Killeen, president and CEO, WorldWinner
The online poker frenzy is rapidly sweeping the globe, yet carries enough geo-political issues with it to fill the world’s. As politicians and operators continue the fight to make online poker legal in the U.S., the skill games market is alive and thriving – and perfectly legal.
While the games offered by skill – based games sites – such as hangman, solitaire, bridge and chess – are certainly not what you’d find in casinos, the U.S. has strict polices governing online game tournaments for cash and prizes. In order to comply with these regulations, skill-based games providers must ensure the outcome of each contest is predominately determined by the player’s skill rather than chance. For leading skill-based games providers, this goal is achieved through a combination of proprietary technologies, patented techniques, and in-house experience “skillifying” games (slightly altering the rules of the game to eliminate elements of luck, without changing what makes the game fun and alluring).
In the Beginning
In 2000, the first of the major skill-based games sites went live, with the hope of turning an idea into a viable, sustainable and repeatable business model. This presented a Catch -22 for skill games providers. The number of potential partners and new marketing opportunities was endless, yet because it was an uncharted, ill-defined territory, many potential partners and government entities shied away from something they knew was legal, but still made then feel uneasy.
Much of the success and legitimization of the skill games market is the result of a long and ongoing educational process. As part of that process, companies like WorldWinner, a pioneer in the skill-based games space, proactively approached congressional leaders in Washington – both in the Senate and House- and the staff of the Senate Banking Committee to educate them about the market, and succeeded in defining skill-based gaming as not being a form of gambling. WorldWinner has also been reviewed by the Department of Justice and worked with the Internal Revenue Service to identify the proper tax withholding treatment for tournament winnings. Each of these steps helped validate the legitimacy of skill-based gaming, while setting standards for the entire industry.
How and to whom skill-based games were being marketed was another challenge approached by trial and error. Because playing skill-based games was believed to be an alternative to gambling, it seemed logical that skill games providers should appeal to players with the promise of winning cash. Hence, skill-based games sites tried to lure players with blinking dollar signs and flashing “Win Cash Now” banners. Also, in line with the common stereotype that playing video and online games is a male-dominated activity, skill games were aggressively marketed to young males, although these games were a far cry from the first-person shooters and role-playing games the demographic typically enjoyed.
We’ve come a Long Way
Today, skill-based gaming is legal in all but eight U.S. states, which don’t differentiate skill games from gambling. Incidentally, these states offer skill game tournaments offline, such as tennis and chess, for cash and prizes, however they prohibit residents from playing in cash competitions online. Because skill-based games operators requires consumers to pay with a credit card or similar credit facility to play for cash, they can use this information, as well as track computer IP addressees, to identify players from these eight states. Skill-based games sites will not allow residents of these states to compete for cash, however they can still play the games for free.
While in the early days, the promise of winning cash was prevalent on skill-based games sites, it wasn’t long before players realized they probably couldn’t make a living playing solitaire or 9-ball pool online. What keeps players returning to skill-based games sites is not the hope of making a fortune, but the opportunity to win bragging rights and prove they’re the best player in a given game. As such, skill-based games sites have replaced the “Win Cash Now” banners with messages designed to fuel players’ competitive fire. In doing so, a new category has been established to define skill-based games: competitive entertainment.
In the last couple of years, skill-based games have become widely accepted by financial, content and distribution partners. Today, major Internet and games portals, as well as more lifestyle Internet sites such as facebook.com (for college students), ThirdAge (for baby boomers) and iVillage (for women), have all partnered with skill-based games sites to attract new players, while the partner sites are able to offer consumers the thrill of competition.
Similar to popular online casual games portals, skill-based game sites attract a largely female audience. Today, we know that the skill-based gaming contingent is comprised of nearly contingent is comprised of nearly two-thirds women, predominantly ages 25-54. Equipped with this knowledge, skill-based games providers can develop content and programming that allows them to more effectively market to their core audience.
Through education and lessons learned, the major skill games sites today are cash-flow positive and aggressively pursuing new avenues to turn even greater profits.
The Road Ahead
Now that the business model has been proven and the market legitimized, many opportunities remain for skill-based games providers in terms of content, distribution partnerships and new platforms.
Skill-based games providers will need to continually tailor their offerings around player’s interests and lifestyles as the market becomes more consumer-driven than ever. There will be an emergence of branded games – such as online versions of popular board games and TV game shows – that have attracted a loyal following in the offline world. Skill-based games providers will also forge ahead with new high-yielding distribution partnerships in an attempt to grow their networks of online players. With so much dependence on the liquidity of online games networks, it is critical that players have a competitor to challenge whenever the need for friendly competition strikes.
As broadband becomes more ubiquitous, more consumers will compete on skill-based games sites. Because most skill-based games require a download to ensure fairness and fraud protection consumers’ increased access to broadband will enhance conversion and game play. A whopping 120.8 million consumers in the U.S. (42 percent to broadband. Not too shabby considering the U.S. currently ranks 12th in the world for broadband penetration, according to the Organization for Economic Cooperation and Development.
The future is in consumer’s hands. Skill-based games operators must adapt their tournament platforms to enable consumers to compete using their preferred device, in their favorite game, and against competitors anywhere in the world. Poker Players will be able to compete in tournaments whether they’re using a mobile phone, wireless device interactive TV, or sitting at their PC.
In just five short years, the skill games market has matured from an untested concept into a legitimate business with a growing, loyal player base. Further adoption of mobile and broadband technologies, licensing of branded content, and the addition of skill-based games to lifestyle Web sites will continue to stimulate the growth of the skill-based games industry.
The heritage of backgammon is deeply rooted in the oldest of games and formed part of the player-to-player gambling evolution that we know today. Indeed, it can be traced back to well before any notion of poker was conceptualized, and while its popularity has wavered over the years, it has shown a remarkable resurgence in recent times.
The skill-based nature of backgammon, coupled with its inherent betting options, live gameplay, and tournament formats, are undoubtedly the key elements to its success. As any semi-serious player will admit, the use of dice is purely an exciting feature incorporated to add random variables to highly skilled game. But the essence, and recurring winning capability, always remains strongly based on the player’s skill level.
At a time when people have become disenchanted with casino-style luck and other forms of luck-based gambling they are turning to sophisticated games of skill-like backgammon – to win money, socialize online, and get their much needed gambling –based adrenaline boost.
The conversion from board-game to online game appears to be the natural progression in this evolution. The inherent nature of backgammon as a gentleman’s game lends itself to the more relaxed atmosphere of armchair- gaming, perfectly suited to the hordes of people continuously switching to the internet way of life. The growth of the game can be likened to the explosion of online poker which made it possible to wager on a game against anyone in the world for large stakes, in a gaming arena where the entire gaming structure and money facilitation process is set up and coordinated for the players.
Moreover, online gaming has opened a gateway to the expansion of the game itself. With multi-table tournaments and numerous new game and betting options, such as ‘Auto-Roll’ and ‘Auto-Bear-off, and Money Gaming.com’s mid-game raising’ feature, the game of Backgammon is becoming ever more sophisticated. And as the hype surrounding online poker quietens and the take up appears to slacken, more and more gamers, both online and offline, are realizing the rewarding poker gaming experience that can be found in online Backgammon.
I am a huge fan of backgammon. I think a handful of companies will generate an incredible amount of revenue from backgammon in 2006. In fact we have invested a lot into our upcoming launch of the World gammon site, which is 100% dedicated to backgammon. But backgammon is not the next “killer-app”. And it doesn’t have to be.
Backgammon cannot be compared to the proven, stand-alone killer application that is poker. It’s clearly a healthy extension to any iGaming operator’s existing portfolio, but as a stand-alone product it si substantially less portfolio, but as a stand-alone product it is substantially less profitable than many other person-to-person games. Consider a Sit ‘n’ Go game of backgammon: just two player stakes comprise the pot; and each game typically takes 8-12 minutes to play to completion. Compare this to the eight players commonly found around the Poker table and 30-45 secs per raked hand and the profitability gap begins to widen. Multi-table knockout tournaments for backgammon assist in generating meaningful rake revenues but the time required to play large-scale tournaments through to completion again undermines the rake revenues per player hour spent online. Consider also the relatively small element of chance, when compared with poker. New backgammon players will always struggle against modestly skilled opponents despite the action of the dice. Even the least able poker player can win a pot with pocket aces. Backgammon is a valuable niche, but will remain a niche unless exploited as an extension to your existing portfolio of gaming products.
The Real Killer App for person to person gaming will be community management.
The killer app should not be defined by any one single game. A suite of products where players can migrate between games is more appropriate to ensuring long term customer retention. Most players will only play an individual game for a finite amount of time. Whether that is three months or three years you will lose that customer unless you have another product waiting for them to move into. Backgammon is a very important part of our product offering but it sits beside other popular multiplayer games like Gin Rummy and Pool.
The Real “Killer”
The thing that sets skill games apart from the other gaming applications is the notion of community. The real killer app for person to person gaming will be community management. At GameAccount we have spent the last 12 months on new multiplayer technology which will fundamentally change the face of skill gaming. We have analyzed every lobby system out there and designed an application that encourages players to pull their friends into the network. I am not just talking about a refer-a- friend program, but technology that allows you to challenge your friends whether they are on our site or not. Now that’s killer!
Backgammon is a contradictory game that is both simple and complex combining skill, luck and intense psychological warfare. Although it is easy to learn, it is also quite difficult to master due to its deep strategic elements where success comes from outsmarting your opponent and, just as in internet poker, it’s often very personal.
I also find backgammon to be one of the most mathematical games. Most of it is not the sort of mathematics that one would initially think about such as the probability of the next roll. Instead, its is the archetypical game of predominantly skill combined with the ‘fun’ element of chance. The depth of the game is substantial, though frequently underestimated by weaker players. The doubling cube requires one to understand not just the relative strengths of positions, but their absolute strengthening as well.
The last few years certainly brought Internet poker into the limelight. Though Internet casinos offering a variety of games remain popular, it is poker that has taken the world by storm. Obviously, television has driven much of the poker’s stratospheric popularity and resulting consumer-demand. The internet poker boom has been phenomenal, and all trends certainly point to further growth. But there is huge underestimated potential in other online games, such as Backgammon with its worldwide popularity already deeply embedded (especially in the Middle-East and Europe ) and dating back hundred of years.
Backgammon is incredibly adaptable for internet play and its growing popularity online certainly attests to that. We launched backgammon on GameColony.com in 2000 and it has become an important and vibrant game for our online community. On GameColony.com for example, players can Betfair’s as little ($ 50) or as much as they feel comfortable (say. $ 250) as there are multiple table from which to choose at any given time.
Most sites necessitate that you download their gaming software and then make a deposit into an account via credit card, with which you buy your online chips. Our games were developed with the latest Java technology, which allows players to launch them from most Internet browsers in just a few seconds.
All our games are conducted in a secure environment on a 24/7 basis. We also offer a variety of daily, weekly and monthly tournaments (Swiss, double and single-elimination) that were designed as interactive online entertainment for adults and are restricted to individuals of legal age in their respective jurisdiction. Players must also meet location eligibility criteria in order to participate. As outlined in our Terms and Conditions, skill-based games with cash prizes are legal in 39 specified U.S. states and in most of Europe and Asia. GameColony.com games do not constitute gambling because they involve predominantly skill, as opposed to chance, and the company also keeps players from getting in over their heads financially by limiting their potential monthly losses.